Silver financing remains the focus of the Vancouver company’s business, which is based on providing funding to mining companies in return for a share of their precious metal output.

The miners take the capital risk, while Silver Wheaton takes ownership of a stream of metal that’s ancillary to the basic mining operation -— and typically isn’t taken into account when analysts calculate the value of a mine.

In Vale’s case, gold is a byproduct of production at Vale’s Salobo copper mine in Brazil as well as production at the company’s iron ore mines in Sudbury, Ont.

The deal with Vale gives Silver Wheaton 25 per cent of Salobo gold production for the life of the mine, and 70 per cent of gold produced at the Ontario mines for 20 years.

“We focus on silver because we see more opportunities there,” Smallwood said in an interview. “We’re more bullish on silver than on gold too. That being said, a lot of the reasons that we’re bullish on silver also apply to gold.

“We like precious metals especially in today’s world economy, with all the fiscal challenges governments have in terms of supporting their currencies and such.”

When an opportunity comes along to strike a partnership with a multinational such as Vale, “we are definitely going to take the step and plunge into that space and do what we can,” Smallwood added.

The deal commits Silver Wheaton to pay a further amount, the lesser of either $400 per ounce or the prevailing market price, on top of the $1.9 billion payment to Vale for gold delivered by the miner.

As well, the deal gives Vale a 10-year option to purchase 10 million Silver Wheaton warrants at $65 per share.

Silver Wheaton is trading at about $36 this week in Toronto.

“If our stock gets to $65 they will be able to exercise these warrants,” Smallwood said. “They would give us $650 million and we would give them 10 million shares.

“If the stock goes to $70 they give us $650 million but they will be able to sell those shares for $700 million so they make $50 million.

“It’s a way of giving them a bit of price participation in terms of the commodity but it doesn’t impact the structure of the streaming deal.”

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